DSME in Check
It has been confirmed that the EU and Japan officially complained about a plan by Korean government-run banks such as the Korean Development Bank to give financial support to Daewoo Shipbuilding and Marine Engineering (DSME).
The Korean government and supporting banks will cope with their complaints by drawing up a report that will explain that the financial support is not a subsidiary by the Korean government.
The EU, led by Germany, and Japan officially objected to the Korea Development Bank’s support for the DSME last month in a meeting of the Council Working Party on Shipbuilding (WP6) of the Organization for Economic Cooperation and Development (OECD) held in Paris earlier this month, according to the shipbuilding industry and Korean financial authorities on Nov. 19. The WTO’s regulations limit nations’ subsidiaries for companies, to promote fair competition among companies around the world.
But Korea refuted that the support was not a subsidy by the Korean government, now that it was led by government-run banks including the Korea Development Bank which is a major creditor of the DSME. The OECD WP6 decided to further deal with the agenda in the next meeting that will be held in June of next year. The Korea Development Bank and Korea Eximbank will make a report to clarify Korea’s position.
The Korean shipbuilding industry and the Korean government, among others, expect that even if the EU and Japan take action, it is highly unlikely that Korea will lose the case, since Korea did not violate any WTO regulations. Analysis says that the EU and Japan aim to keep Korea, the world’s shipbuilding leader, and China, a rising star in the world shipbuilding industry, in check via this move.
In the early 2000s, a similar shipbuilding dispute pitted Korea against other nations, but Korea finally won. However, this time, if the EU and Japan really bring the case before the court, it will cost Korea billions of won in legal battles against the EU and Japan and a large amount of human resources from various organizations, putting Korea in a war of attrition. Then it is feared that the legal action will have a negative impact on the Korean shipbuilding industry. In particular, when Hynix received some support from the outside, the U.S. government made a strong protest against it, weakening the support. In the event that such a protest continues, it may become difficult for the troubled shipbuilder to receive additional support from the outside.